[This is based on the final draft on my hard
disk, and may differ in detail from the published
version]

Originally published in Social Philosophy &
Policy, volume 11, number 2 (Summer 1994), published by Cambridge
University Press. Copyright 1994 by the Social Philosophy and Policy
Foundation. Reprinted with the permission of the Social Philosophy
and Policy Foundation. Any reproduction, copying, downloading, or use
of any kind of this material is a violation of copyright, and such
uses must first receive written permission by contacting the Social
Philosophy and Policy Center, Bowling Green State University, Bowling
Green, Ohio 43403.

A Positive Account of Property
Rights

In thinking and talking about rights, including
property rights, it seems natural to put the argument in either moral
or legal terms. From the former viewpoint, rights are part of a
description of what actions are right or wrong. The fact that I have
a right to do something is an argument, although not necessarily a
sufficient argument, that someone who prevents me from doing it is
acting wrongly.[1]

From the legal standpoint, rights are a
description either of what the law says or of how it is enforced. On
the latter interpretation, "I have a right to do X" translates as
something like "If I do X the police will not arrest me; if someone
tries to stop me from doing X the police will arrest
him."[2]
From this standpoint, one might claim that people in Holland have the
right to buy marijuana and people in America have the right to drive
5 miles per hour over the speed limit, even though both are
illegal.

Both of these approaches have serious difficulties
if our goal is to understand the phenomenon of rights, and associated
phenomena, as they actually exist in the real world. We frequently
observe behavior which looks like the claiming of rights and the
recognition of rights in contexts where neither a moral nor a legal
account seems relevant.

Consider, for example, Great Britain's "right" to
control Hong Kong, Kowloon, and the New Territories. It is difficult
to explain Communist China's willingness to respect that right on
legal grounds, given that, from the Maoist standpoint, neither the
government of Britain nor previous, non-communist governments with
which it had signed agreements were entities entitled to any moral
respect. It seems equally difficult to explain it on legal grounds,
given the general weakness of international law and the fact that for
part of the period in question Great Britain (as a member state of
the United Nations) was at war with China. An alternative
explanation—that the Chinese government believed that British
occupation of Hong Kong was in its own interest—seems
inconsistent with the Chinese failure to renew the lease on the New
Territories, due to expire in 1997.

A second example is presented by the 1982
Falklands war. On the face of it, the clash looks like an attempted
trespass repelled. Moral and legal accounts seem irrelevant, given
the attitude of Argentina to the British claim. Yet the willingness
of Britain to accept costs far out of proportion to the value of the
prize being fought over is difficult to explain except on the theory
that the British felt they were defending their property, which
raises the question of what that concept means in such a
context.

A further difficulty with moral accounts of
rights, in particular of property rights, is the degree to which the
property rights that people actually respect seem to depend on facts
that are morally irrelevant. This difficulty presents itself in
libertarian accounts of property as the problem of initial
acquisition. It is far from clear even in principle how unowned
resources such as land can become private property. Even if one
accepts an account, such as that of Locke, of how initial acquisition
might justly have occurred, that account provides little
justification for the existing pattern of property rights, given the
high probability that any piece of property has been unjustly seized
at least once since it was first cleared. Yet billions of people, now
and in the past, base much of their behavior on respect for property
claims that seem either morally arbitrary or clearly
unjust.

A further difficulty with legal accounts of rights
is that they are to some degree circular. We observe that police will
act in certain ways and that their action (and related actions by
judges, juries, etc.) implies that certain people have certain
rights. But the behavior of police is itself in part a consequence of
rights—such as the right of the state to collect taxes and pay
them to the police as wages and the property right that the police
then have over the money they receive.

For all of these reasons, I believe it is worth
attempting a positive account of rights—an account which is
both amoral and alegal. In part I of this essay I present such an
account—one in which rights, in particular property rights,
are a consequence of strategic behavior and may exist with no moral
or legal support.[3]
The account is presented both as an explanation of how rights could
arise in a Hobbesian anarchy and as an explanation of the nature of
rights as we observe them around us. In Part II I suggest ways in
which something like the present structure of rights might have
developed.

One puzzling feature of rights as we observe them
is the degree to which the same conclusions seem to follow from very
different assumptions. Thus roughly similar structures of rights can
be and are deduced by libertarian philosophers trying to show what
set of natural rights is just and by economists trying to show what
set of legal rules would be efficient. And the structures of rights
that they deduce seem similar to those observed in human behavior and
embodied in the common law. In Part III of this essay I will try to
suggest at least partial explanations for this triple
coincidence—the apparent similarity between what is, what is
just, and what is efficient.

Part I: Schelling Points, Self-Enforcing
Contracts, and the Paradox of Order

Several writers have tried to analyze the
transition from a Hobbesian state of nature to a state of civil order
in terms of a set of hypothetical contracts establishing an initial
distribution of property rights based on a preexisting distribution
of power.[4]
One difficulty with this approach is that in the initial situation
there are no institutions to enforce contracts. How can people in
that situation change it by making contracts which are unenforceable
and so of no effect?[5]

The same problem can be seen from the other side
by asking in what sense we, or any society, are ever out of a
Hobbesian state of nature. What do we have, what have we created,
that does not exist in the Hobbesian jungle? Civil order is not
defined by the existence of physical objects—court rooms,
police uniforms, law books. We can easily enough imagine a Hobbesian
jungle—in the middle of a war, say—coexisting with all
the physical appurtenances of civil society. And primitive peoples,
without court rooms or law books, nonetheless live in a state of
civil order.

Nor does it suffice to say that we are in a state
of civil order because we have judges to interpret our laws and
police to enforce them. Why do those people act in that way?
Presumably because it is in their private interest to do
so—just as potential criminals obey the law for the same
reason. But that is how people act in the Hobbesian jungle. There
too, one man may happen to enforce a rule, and another happen to obey
it, because each finds it in his own interest to do so. What is it
that we have and the Hobbesian jungle does not have that makes it in
the interest of people to behave in a law abiding and peaceful
manner? To say that the answer is "police, courts, government" only
throws the question back a step; if civil order is enforced by men
with guns, what controls them?

There are two sorts of answers to these questions.
One is that the difference is a moral one. People somehow accept an
obligation, agree not to behave according to simple self
interest, feel themselves bound by that agreement and alter their
actions accordingly.

There are difficulties with this sort of
explanation. First, there is the empirical observation that people do
not feel themselves bound to obey laws; many, perhaps most, people
feel free to violate those laws (speed limits, drinking laws, customs
regulations) which they disagree with and believe they can get away
with breaking. Second, to the extent that people do feel a moral
obligation to obey social rules, it is hard to derive that feeling
from any variant of social contract theory. The traditional variants
encounter the difficulty eloquently described by Lysander
Spooner;[6]
since we ourselves did not sign the contract we are not bound by
it.

The difficulties with deriving moral obligation
from the sort of pairwise social contract suggested by Winston
Bush[7]
are equally great. Even if we consider that each of us is, at every
instant, in an implicit contract with each of his neighbors to
respect some agreed upon set of rights, still that contract, in
Bush's model, is based on the threat of coercion. It has no more
moral legitimacy, according to conventional moral ideas, than the
obligation to pay off a protection racket.

It may be possible to explain the difference
between a Hobbesian state of nature and civil society as a moral
difference, but I prefer the alternative explanation—that the
essential difference is not in the motivation of the players but in
the strategic situation they face. This raises the question of how
making an agreement—in a society with no mechanisms for
enforcing agreements—can change anything, the strategic
situation included.

Two people are separately confronted with the list
of numbers shown above and offered a reward if they independently
choose the same number. If the two are mathematicians, it is likely
that they will both choose 2—the only even prime.
Non-mathematicians are likely to choose 100—a number which
seems, to the mathematicians, no more unique than the other two exact
squares. Illiterates might agree on 69, because of its peculiar
symmetry—as would, for a different reason, those whose
interest in numbers is more prurient than mathematical.

There are three things worth noting about this
simple problem in coordination without communication. The first is
that each pair of players is looking for a number that is in some way
unique. To a mathematician, all three squares are special numbers, as
are the three primes. But if they try to coordinate on a square or a
prime, they have only one chance in three of success—and
besides, one may be trying primes and the other squares. 2 is unique.
If the set of numbers did not contain 2 but did contain only one
prime (or only one square, or one perfect number) they would choose
that.

The second thing to note is that there is no
single right answer; the number chosen by one player, and hence the
number that ought to be chosen by the other, depends on the
categories that the person choosing uses to classify the
alternatives. The right strategy is to find some classification in
terms of which there is a unique number, then choose that
number—a strategy whose implementation depends on the
particular classifications that pair of players uses. Thus the right
answer depends on subjective characteristics of the
players.

The third point, which follows from this, is that
it is possible to succeed in the game because of, not in spite of,
the bounded rationality of the players. To a mind of sufficient scope
every number is unique.[9]
It is only because the players are limited to a small number of the
possible classification schemes for numbers, and because the two
players may be limited to the same schemes, that a correct choice may
exist. In this respect the theory of this game is radically different
from conventional game theory, which assumes players with unlimited
ability to examine alternatives and so abstracts away from all
subjective characteristics of the players except those embodied in
their utility functions.[10]

Consider now two players playing the game called
bilateral monopoly. They have a dollar to divide between them,
provided they can agree how to divide it. Superficially there is no
resemblance between this game and that discussed above; the players
are free to talk with each other as much as they want.

But while they can talk freely, there is a sense
in which they cannot communicate at all. It is in my interest to
persuade you that I will only be satisfied with a large fraction of
the dollar; if I am really unwilling to accept anything less than
ninety cents, you are better off agreeing to accept ten cents than
holding out for more and getting nothing. Since it is in the interest
of each of us to persuade the other of his resolve, all statements to
that effect can be ignored; they would be made whether true or not.
What each player has to do is to guess what the other's real demand
is, what the fraction of the dollar is without which he will refuse
to agree. That cannot be communicated, simply because it pays each
player to lie about it. The situation is therefore similar to that in
the previous game; the players must coordinate their demands (so that
they add up to a dollar) without communication. It seems likely that
they will do so by agreeing to split the dollar
fifty-fifty.

The same points made about the previous game apply
here, although less obviously. The players are looking for a unique
solution; if I decide that the natural split is one third-two thirds
and you agree, both of us reasoning from a mystic belief in the
significance of the number three, there is still the risk that each
will decide he is entitled to the two-thirds.

To see that the solution depends on the particular
categories used by the players, imagine that both have been brought
up to believe that utility, not money, is the relevant payoff, and
suppose further that both believe the marginal utility of a dollar to
be inversely proportional to the recipient's income. In that case,
the solution to the game is not a fifty-fifty split of money but a
fifty-fifty split of utility—implying a division of the dollar
into shares proportional to the two players' incomes.[11]

Such an outcome, chosen because of its uniqueness,
is called a Schelling point, after Thomas Schelling who originated
the idea. It provides a possible solution to the problem of
coordination without communication. As this example shows, it is
relevant both to situations where communication is physically
impossible and to situations where communication is impossible
because there is no way that either party can provide the other with
a reason to believe that what he says is true.

Even if it is impossible for the players in such a
game to communicate their real demands, it may still be possible for
them to affect the outcome by what they say. They could do so, not by
directly communicating their own strategies (any such statement will
be disbelieved), but by altering the other player's categories, the
ways in which he organizes the alternatives of the game, and so
changing the Schelling points which depend on those
categories.

In the example just discussed, for example, one
player (presumably the richer) might remind the other of their shared
belief in the importance of utility in order to make sure the
equi-utility Schelling point would be chosen. If, in the first game I
described, the players were allowed to talk before seeing the
numbers, a conversation on the interesting properties of primes or
the special uniqueness of the lowest of a series of numbers might
well alter the Schelling point, and so the result of the game. One
can interpret a good deal of bargaining behaviour in this
light—as an attempt by one party to make the other see the
situation in a particular way, so as to generate a Schelling point
favorable to the first party.

A slightly different way in which one may
conceptualize the process of agreement on a Schelling point is in
terms of bargaining costs in a context of continuous
bargaining.[12]
Consider a situation in which the number of possible outcomes is very
large. Suppose the process of bargaining is itself costly, either
because it consumes time or because each player bears costs (such as
staying out on strike) in trying to validate his threats. As long as
the players are faced with a choice among a large number of
comparable alternatives, each proposal by one player is likely to
call forth a competing proposal from another, slanted a little more
in his own interest.

But suppose there is one outcome that is seen as
unique. A player who proposes that outcome may be perceived as
offering, not a choice between that outcome, another slightly
different, another different still, . . . but a choice between that
outcome and continued bargaining. A player who says that he insists
on the unique outcome and will not settle for anything less may be
believable, where a similar statement about a different outcome would
not be. He can convincingly argue that he will stand by his proposed
outcome because, once he gives it up, he has no idea where he will
end up or how high the costs of getting there will be.

In order for a Schelling point to provide a
peaceful resolution to a conflict of interest, both parties must
conceptualize the alternatives in similar ways—similar enough
so that they can agree about which possible outcomes are unique, and
thus attractive as potential Schelling points. So one interesting
implication of the argument is that violent conflict is especially
likely to occur on the boundary between cultures, where people with
very different ways of viewing the world interact.

IB. Up From Hobbes

Two people are living in a Hobbesian state of
nature. Each can injure or steal from the other, at some cost, and
each can spend resources on his own defense. Since conflict consumes
resources, both could benefit by agreeing on what each owns and
thereafter each respecting the other's property. The joint benefit
might be divided in different ways, according to the particular set
of property rights they agree on—what property belongs to
whom, and whether either has a property right in tribute from the
other. This is a special case of the game—bilateral
monopoly—described above.

Each player, of course, will threaten to refuse to
make any such agreement unless he gets the division he wants. Each
will disbelieve most of the other's threats. If their ability to
coerce and defend is roughly equal, and if there is some natural
division of contested property (such as a stream running between
their farms), it is likely that they will find a Schelling point in
the form of an agreement to accept that division, respect each
other's rights, and pay no tribute.

If one (being, perhaps, slightly more powerful)
tries to insist on a small tribute, arguing that it will still leave
the other better off than continued conflict, the other may
believably refuse, arguing that once he concedes any tribute there is
no natural limit to what the other can demand. Agreeing to tribute
costs the victim not only the tribute but the only available
Schelling point. The expected cost to him of such an agreement
includes both the possible cost of paying higher tribute in the
future and the risk of future conflicts if in the future he rejects
demands for higher tribute. That cost may be high enough to make his
insistence that he will choose continued conflict over the payment of
even a small tribute believable.

So far we have considered the Schelling point that
generates an agreement. But the agreement itself, whether generated
by a Schelling point or in some other way, is thereafter itself a
Schelling point. It is a unique outcome of which both players are
conscious. Once it has been made, a policy of "if you do not abide by
the agreement I will revert to the use of force, even if the
violation is small compared to the cost of conflict" is believable
for precisely the same reason the refusal to pay tribute, or any
insistence by a bargainer on a Schelling point, is believable. The
signing of a contract establishes a new Schelling point and thereby
alters the strategic situation. The contract enforces
itself.

This applies not only to the initial pairwise
social contract but to subsequent contracts as well. Suppose you have
an orchard and I have an axe. After agreeing on our mutual property
rights, you offer me a bushel of apples to cut down a tree that is
shading your orchard. I cut down the tree as agreed, but you refuse
to give me the apples. What happens?

So far as our physical situation is concerned, I
am in no more able to compel you to pay me a bushel of apples now
than I was before you made the offer and I cut down the
tree—our material resources, our ability to hurt each other
and defend ourselves, are the same as they were. Yet my threat to cut
down your orchard unless you pay up is more credible than it would
have been before, both because I have more reason to carry through on
it and because you have less reason to resist it. Before, the attempt
to get a bushel of apples from you would have been an attempt to move
you away from the Schelling point established by the initial
contract. Now it is an attempt to restore the Schelling point
established by our subsequent agreement.

A more conventional explanation of this is that
the reason it is in your interest to deliver the apples once you have
agreed to do so is that you wish to establish a reputation for
keeping promises, and that the reason it is in my interest to punish
you if you do not deliver the apples is because I wish to establish a
reputation for enforcing contracts made with me. While this may be
true, there are two reasons why it cannot be a complete explanation.
First, it depends on a particular perception of consistent
behavior—in pure logic, there is no more reason to think of
"always enforce" as more consistent then "back down the first, third,
fifth, ... time and fight the second, fourth, ... ." Both describe
single possible strategies. The important difference between them is
that the former is a Schelling point and the latter is not— a
fact not about the strategies but about the way we classify
them.

A second and related problem with the conventional
account is that I might equally well wish to establish a reputation
for following through on extortionary demands. We need some way of
explaining why I cut down the shade tree first, instead of simply
committing myself to demand your apples. If the former pattern
creates a Schelling point of contract fulfillment and the latter does
not, that provides a possible explanation.

I believe I have now resolved the apparent paradox
of contracting out of the Hobbesian jungle. The process of
contracting changes the situation because it establishes new
Schelling points, which in turn affect the strategic situation and
its outcome. The same analysis can be used from the other side to
explain what constitutes civil society. The laws and customs of civil
society are an elaborate network of Schelling points. If my neighbor
annoys me by growing ugly flowers, I do nothing. If he dumps his
garbage on my lawn, I retaliate—possibly in kind. If he
threatens to dump garbage on my lawn, or play a trumpet fanfare at 3
A.M. every morning, unless I pay him a modest tribute I
refuse—even if I am convinced that the available legal
defenses cost more than the tribute he is demanding.

If a policeman arrests me—even for a crime
I did not commit—I go along peacefully. If he tries to rob my
house, I fight, even if the cost of doing so is more than the direct
cost of letting him rob me. Each of us knows what behavior by
everyone else is within the rules and what behaviour implies
unlimited demands, the violation of the Schelling point, and the
ultimate return to the Hobbesian jungle. The latter behaviour is
prevented by the threat of conflict even if (as in the British
defense of the Falklands) the direct costs of surrender are much
lower than the direct costs of conflict.

One question this raises is how we succeed in
committing ourselves not to back down in such situations. One answer
has been suggested already. It is in my long run interest not to back
down because if I do I can expect further demands: "if once you have
paid him the danegeld/You never get rid of the Dane."[13]

This explanation is not entirely adequate. In some
situations, the aggressor may be able to commit himself to keep your
surrender secret and limit his own demands. In others, the short run
costs of resistance may be larger than the long run costs of
surrender.

People (and nations) do sometimes surrender to
such demands. If they do so less often then a simple calculation of
costs and benefits might predict, the explanation may be found in a
class of arguments made by Robert Frank and others.[14]

The central insight of such arguments is that even
if surrender is sometimes in my private interest, being the sort of
person who will surrender when it is in his interest to do so may not
be, since if it is known that I will not back down there is no point
in making the initial demand.[15]
My first best option is to pretend to be tough, in the hope that the
demand will not be made, while reserving the option of surrendering
if my bluff is called. If, however, humans are imperfectly able to
lie to each other about what sort of people they are—as seems
to be the case—then the best available option may be to really
be tough, despite the risk that I will occasionally find myself
forced to fight when I would be better off surrendering.

None of this argument depends on moral sanctions.
I may (indeed do) believe that the tax collector is morally
equivalent to the thief. I accept one and fight the other because of
my beliefs about other people's behaviour—what they will or
will not fight for—and because there are beliefs about my
behaviour which I wish others to hold. We are bound together by a set
of mutually reinforcing strategic expectations.

II. Two Routes from Hobbes to
Here

My argument so far has dealt with two ends of an
extended process. I started with an explanation of how it was
possible, in a two person world, to take the first steps towards
bargaining out of a Hobbesian state of nature. I ended with an
explanation of how the same logic maintains civil order as we know
it. Missing is any explanation of the intermediate steps by which the
complicated and functional order in which we live might have been
constructed.

One possibility is legislation. If an important
part of the way in which individuals classify actions is
"legal/illegal," then the fact of legal change, whether by a king,
legislature, or court system, changes the way in which they classify
the alternatives, which in turn changes the set of Schelling points.
If the court has recognized property rights in water but not in air,
I classify pollution of my section of the river as aggression and
fight it, by legal, social, or even illegal means. I classify
pollution of my air by my neighbor's soap factory as an inconvenient
nuisance and either put up with it or try to buy him off. Under these
circumstances legislation is, to a considerable degree,
self-enforcing; the pattern of property rights might well survive
even if the enforcement arm of the state vanished or became
impotent.

While this may be part of the explanation for
civil order, it cannot be all of it, for at least three reasons.
First, some rights have no legal rules associated with them. Second,
many, perhaps most, people are selective about which legal rules they
take seriously—as can easily be observed on any U.S. highway.
And finally, there are well documented situations in which property
rights exist and are respected even though they are inconsistent with
the relevant legal rights.

This final point brings up a second possible
explanation of how the pattern of expectations might have come into
existence—that it is due not to the creation of laws but to
the evolution of norms. Robert Ellickson, in a recent book, describes
how relations among neighbors function in Shasta County
California.[16]
One of his most striking observations was that in several cases,
including conflicts over trespass by animals and the allocation of
the cost of building fences between neighbors, the inhabitants ignore
the relevant laws and act instead according to well understood
non-legal norms. Ellickson offers no adequate account of how such
norms develop or of why they provide, in some contexts but not in
all, at least approximately efficient rules. A possible answer to
that puzzle brings us back to the two person social contract
discussed in the previous section.[17]

One might try to explain functional norms by
evolution. Perhaps, over time, societies with better norms conquer,
absorb, or are imitated by societies with worse norms, producing a
world of well designed societies. The problem with that explanation
is that such a process should take centuries, if not
millennia—which does not fit the facts as Ellickson reports
them. Whaling norms in the 19th century, for example, seem to have
adjusted rapidly to changes in the species being hunted.

Perhaps what is happening is evolution, but
evolution involving groups much smaller and more fluid than entire
societies. Consider a norm, such as honesty, that can profitably be
followed by small groups within a society, applicable only within the
group. Groups with efficient norms will prosper and grow by
recruitment. Others will imitate them. Groups with similar norms will
tend to fuse, in order to obtain the same benefits on a larger scale.
If one system of norms works better than its competitors, it will
eventually spread through the entire society. When circumstances
change and new problems arise the process can repeat itself on a
smaller scale, generating modified norms to deal with the new
problems. In effect, what we have is the pairwise contracting out of
the Hobbesian state of nature, repeated many times between pairs and
within small groups.

This conjecture about how norms arise and change
suggests a prediction: Even if a norm is efficient, it will not arise
if its benefits depend on its being generally adopted. Suppose we
define a norm as locally efficient if, with regard to any two
individuals following the norm, there is no different norm such that
at least one would be better off and the other no worse off if they
both switched to it. A norm is globally efficient if there is no
different norm such that at least one person would be better off and
nobody worse off if everyone switched to it.[18]

Consider the whaling norms that Ellickson
discusses. It is in the interest of any pair of captains to agree in
advance to an efficient rule for dealing with whales that one ship
harpoons and another one brings in, just as it is in the interest of
a pair of individuals to agree to be honest with each other. But a
rule for holding down the total number of whales killed so as to
preserve the population of whales is useful only if almost everyone
follows it. The former type of norm existed, the latter did
not—with the result that 19th century whalers did an efficient
job of hunting one species after another to near
extinction.[19]

So the evolution of norms provides a second
possible account of how we get from Hobbes to here. Where the
recognition of rights between two people, such as neighbors, or
within a small group, provides mutual benefits, it is in the interest
of the parties concerned to recognize such rights.[20]
By doing so they change the pattern of Schelling points that
determines the equilibrium of their interaction, in a way which
provides (some) protection for the rights in question. Over a long
period of time, the result is to create a set of consistent mutual
expectations, and one that tends to be locally, although not
necessarily globally, efficient.

III: Law, Justice, and
Efficiency

In thinking about issues of rights, I find myself
playing two quite different roles. As a human being and (like all
human beings) an amateur philosopher, I have moral intuitions; from
that standpoint, the question is "why ought one not to steal" and the
answer is "because it is wicked." As an economist I ask and answer
different questions. One is "what are the consequences of people
being free to steal." Much of the economic analysis of law is devoted
to answering questions of that sort. Another is "why do people
(often) not steal?"

This essay is an attempt to answer that final sort
of question. I have tried to answer the economist's question about
rights rather than the philosopher's not because economics is more
important than moral philosophy but because I am more confident in my
ability to use economics to produce answers.[21]
I have been encouraged in this policy by a curious and convenient
coincidence: in most cases, the rules I conclude to be efficient are
also the rules I believe to be just.

It is not a double but a triple coincidence. The
rules I believe to be efficient and just are also, to a significant
degree, the rules enforced by the laws and norms of the society I
live in.[22]
In this essay I have sketched some ideas about the nature of those
rules and how they have evolved. This raises the question of why, if
my account is correct, the rules produced in this way resemble those
that I deduce to be efficient and intuit to be just.

In trying to answer that question, I find it
useful to start by considering a class of property which underlies
all other property and exists even in a Hobbesian state of
nature.

I can control the motions of my body by a simple
act of will. You can control its motions by imposing overwhelming
force, by making believable threats to which I will yield, or in
various other ways. Controlling it may be possible for both of us,
but it is much cheaper and easier for me. In this sense, we may
describe my body as my natural property. The same description applies
to my gun—because I know where I hid it and you do not. Even
land may be natural property to some extent if my detailed knowledge
of the terrain makes it easier for me to use or defend it. Such
property is natural inasmuch as my possession of it exists in the
state of nature and is independent of social convention. The fact
that I can control certain things more cheaply than you can is
technology, not law or morals.

Natural property is a useful starting point for
explaining the similarities among what is, what should be, and what
would be efficient because it is relevant to all three.

If the account I have offered is correct, our
actual civil order is the result of extended bargaining, based
ultimately on natural property. It was my control over my body that
made the initial steps out of the state of nature possible. So
natural property is relevant to what is—to the existing
pattern of laws and norms.

In a world of no transaction costs, any initial
allocation of property rights is efficient.[23]
In a world with positive transaction costs, the basis for choosing
among alternative allocations is the cost of enforcing and changing
them. A set of rules in which I own my body and you own yours is
superior to one in which each owns the other's body, or each has a
half interest in each body, in part because it is so much easier to
enforce. So we have a Coasian argument for the relevance of natural
property to what is efficient.

This argument also provides a second connection
between natural property and what is. My earlier arguments suggest
that the evolution of rules tends to move in a direction that is at
least locally efficient. If so, and if rules that allocate natural
property to its natural owner are efficient, we would expect to
observe such rules. Put differently, the argument for local
efficiency of evolved norms provides a reason for some similarity
between the rules we observe and the rules that are
efficient.[24]

What, if anything, does natural property have to
do with what ought to be? That depends on what normative account one
accepts. For those of us who accept a libertarian account, in which
the underlying right is my right to own myself and whatever I have
obtained by voluntary agreement with others who own it, the
connection is immediate. Self ownership is both a moral axiom and a
technological fact. Voluntary exchange is both a morally legitimate
way of altering the pattern of ownership and, if my account of
bargaining from the state of nature is correct, a technologically
possible way (although not necessarily the only such) of altering a
Schelling point and thus an equilibrium.

We now have the beginning of an explanation of the
similarity among actual rules, efficient rules, and just rules. The
status of this explanation, and of the fact being explained, is not,
however, the same for the relation between the first two as it is for
the relation of either to the third.

What rules exist can be observed and what rules
are efficient can be deduced, at least in principle, from observed
technologies and economic theory. Thus the claim that there is some
correspondence between what exists and what is efficient is a
positive rather than a normative claim.[25]

What ought to be, on the other hand, is, at least
in this essay, simply a description of my moral intuitions. If I
conclude that the rules that would be just are similar to both the
rules that exist and the rules that would be efficient, that may
simply be evidence that my moral judgments are ex post
rationalizations of the world I live in or the conclusions of my
economic analysis.

One further similarity between the ethics and the
social order that I have been discussing is worth mentioning. Both
are essentially decentralized. The ethical position makes no attempt
to evaluate individuals from above—in terms of their worth in
the eyes of God. It consists rather of a description of what
obligations each individual has to each other
individual.[26]
The social order, to the extent that it is evolved rather than
legislated, is a set of rules that exist because it was in the
interest of pairs of individuals to abide by them, not because they
promote the general good of society.[27]

IV: Conclusions

The central project of this essay has been to give
an account of rights, especially property rights, that is both amoral
and alegal—an account that would explain the sort of behavior
we associate with rights even in a world lacking law, law
enforcement, and feelings of moral obligation.[28]
I have tried first to explain how, with no legal system to enforce
contracts, it might still be possible to contract out of a Hobbesian
state of nature, and then to show how the same analysis can be used
to understand in what sense a civil order, such as our own society,
is different from a Hobbesian state of nature. Having offered answers
to those questions, I then tried to show how we might get from the
state of nature to something like the present society, and to use the
analysis to partially explain the puzzling similarity between actual
rules, just rules, and efficient rules.

If my analysis is correct, civil order is an
elaborate Schelling point, maintained by the same forces that
maintain simpler Schelling points in a state of nature. Property
ownership[29]
is alterable by contract because Schelling points are altered by the
making of contracts. Legal rules are in large part a superstructure
erected upon an underlying structure of self-enforcing
rights.